This is, I think, A very important observation from Robert Waldmann—one that has escaped the mainstream public finance literature. He has convinced me that what the utilitarian math says has always been... misread... in an elementary mistake similar to the "neo-Fisherian" claim that the way to raise inflation is to raise nominal interest rates: it is a fundamental misunderstanding of the properties of the dynamic system:

**Robert Waldmann**: *If one wishes to redistribute from the rich, and also worries about the effect of taxes on wealth on incentives to save,* then the correct strategy is to tax at the maximum rate possible until there is no longer any reason to redistribute http://rjwaldmann.blogspot.com/2008/06/optimal-capital-income-taxation-it-is.html. This is a mathematical result based on the most standard economic model. Math doesn't care about Alan Cole's feelings. In a one period model, one must settle for the second best. In an infinite horizon model one eventually gets to first best from now on. It is widely noted that [in a model with T periods] the optimal tax on wealth (and on capital income) goes to zero as T goes to infinity. It is less often noticed that the way this happens is all taxation which serves any [redistributive] purpose is completed as quickly as possible...

...If the state is allowed to accumulate a sovereign wealth fund, it should do so until it can cover all the expenses and provide all the welfare benefits it might wish to provide out of its capital income. Then and only then it should leave private capital income alone. For some parameters, the optimum is achieved with 99% public ownership of the means of production. I stress that this is the standard analysis. If the state isn't allowed to own capital, then the standard result is simply a math mistake which went un-noticed for decades.

Marx had a theory about the failure to get the math right, but I am not a Marxist...

Robert is responding to:

**Alan Cole**: "I have seen this response several times from wealth tax advocates. Not once have I seen them do anything to help savers or investors at any level of income. Put money away for later and you become a piñata for them to beat at with a stick. It's short-termism all the way down...

**Nick Beaudrot**: "Ah yes, all those 'savers' who 'put money away' until it reaches :checks Warren's plan: $50MM in assets. https://twitter.com/AlanMCole/status/1169610684465913856

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#noted #2019-09-23
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